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Political Connection of Board, Dividend Policy and Enterprise Value

Author: LiWei
Tutor: HuXuYang
School: Zhejiang University of Finance
Course: Finance
Keywords: Board of directors Political association Dividend Policy Enterprise Value
CLC: F275
Type: Master's thesis
Year: 2010
Downloads: 418
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Abstract

The Directors are responsible for the business management and decision-making, their political association as a resource, the same as the ownership position and governance structure has an important role. China as a centralized planned management system transition to a market economy country, the Government of the market a tremendous impact, a large number of directors of listed companies with a government background, and this trend continues. Therefore, the research of the Board of politics associated with the company's operating performance this question makes sense. Domestic and foreign scholars have found that political association may both enhance corporate performance and may have a negative impact on corporate value. And further explore the mechanism of the politics associated with the enterprise value, trying to explore in depth the political association of the enterprise value of the mechanism of action of the different impact results. Scholars in empirical analysis of political association to enhance corporate value mechanism proved financing facility effects include political association, the effect of tax incentives and control breakthrough effect. Research but rarely on the political association of the reduction mechanism of the enterprise value representative of the view that the lack of political association executive management capacity and political association to maintain the high cost of, and these ideas just to stay in the conjecture level, not proven proof. Therefore, the relationship between politics associated with the enterprise value of listed companies in China, as well as reducing the role of impact mechanism of the enterprise value is very necessary to conduct empirical research. A shares in China before 2007 non-financial listed companies as samples, using the data of the 2008 Annual Report, and excluding of ST enterprises and backdoor listing enterprises. By setting the dividend policy model and enterprise value model, using multiple linear regression method, to explore the relationship of the Board of Directors of political association, the cash dividend policy and corporate value. The results show that: (1) the impact of the cash dividend policy in the political relevance of the Board. Overall political association and direct political association can significantly enhance the rate of cash dividends and indirect political connection between the cash dividend is not significant. The sample is divided into state-owned enterprises and private enterprises, the results are obvious differences: in state-owned enterprises, only the Director of Government departments work experience in order to enhance the level of cash dividends; For private enterprises, all direct political background and government adviser, the directors are able to enhance The cash dividend rate, but the background director of industry associations Quedui cash dividends have a negative effect. (2) the political relevance of the Board and its impact on the enterprise value through the cash dividend policy. Overall, government departments, work experience and government adviser directors can significantly enhance corporate value, background background of the NPC and the CPPCC, and industry associations directors of the enterprise value of no significant impact. General political association and indirect the crossover role of politics associated with the cash dividend to significantly reduce the enterprise value, the cross variables of direct political connection with the cash dividend has no obvious impact on corporate value. For state-owned enterprises and private enterprises: in private enterprises, the political association of the enterprise value the same as with the results of the overall sample; significant relationship does not exist between the state-owned enterprises, government departments experienced directors and corporate value. In addition, state-owned enterprises and private enterprises in all politics associated with cross-cash dividend on the enterprise value had no significant effect, but relatively speaking, the more obvious direct political association with the intersection of the cash dividend reduction of the role of private enterprises in the value of, and indirect political role associated reduction in the value of state-owned enterprises is more obvious. (3) the relationship between political relevance in different market levels and cash dividends and corporate value. High market oriented level regions, the various types of political association of enterprise value to enhance the role is not significant, overall political association through cash dividends significantly with lower enterprise value; in low market-oriented level areas, the Board of Directors of political association able to significantly forward to enhance corporate value, political related cash bonus of reducing the role of the mechanism of the enterprise value is not significant. This study has some exploratory innovation is mainly reflected in the following aspects: This topic has a certain novelty, early in the domestic political relevance of the Board, the relationship between the cash dividend policy and the enterprise value of the three study , comparative analysis, and state-owned enterprises and private enterprises, and also studied the effect level of political association under different market level. Variable selection: First, the political association is divided into two categories of direct political association and indirect political association, and includes two subclasses. Compared with the previous study, this paper divided the politics associated more detailed and in-depth; Second, a measure of political association, political associate director of proportion to indicate the degree of relevance of the Board of Directors politics, which overcome the dummy variables measure only whether the politics associated defects; addition, the analysis also controls industry variables and market impact. The analysis of this article has theoretical and practical significance: First, choose managers of corporate shareholders, not blindly in order to implement a political strategy arbitrary choice of political association directors. This study found that political association is to enhance corporate value, but specific to the different type of political association and enterprises of different nature, this effect is different. Second, capital market participants, tend to get a stable dividend income investors, in addition to the analysis of corporate financial indicators, but also through the investigation of the Board of Directors of political association elected the favorite investment object. In addition, some of the conclusions of this paper can provide a reference for business managers. We find that Chinese enterprises generally high financial leverage, and the enterprise value had a negative impact, this arrangement has referential significance of corporate financial structure.

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